AURORA | Gov. Jared Polis on Wednesday called for a special session of the legislature and ordered a statewide hiring freeze in response to what he described as a fiscal emergency triggered by sweeping federal tax reforms signed into law last month by President Donald Trump.
“If we were to wait until next year, it would be a lot more draconian in terms of cuts,” Polis said. “We can effectively spread out the cuts across 11 months of the year, assuming that we’re able to implement them from the beginning by Sept. 1.”
Polis summoned lawmakers to return to the Capitol Aug. 21 to address the deep budget shortfalls caused by H.R. 1, the so-called “Big Beautiful Bill” that overhauled federal taxes, signed on July 4.
The call for a special session drew sharp criticism from state House and Senate Republicans, who called the move “political theater.” The reaction highlighted the ongoing battle between the parties tagging the Trump tax bill as either an unmitigated disaster or a national salvation.
“This is a waste of taxpayer dollars and state resources,” House Minority Leader Rose Pugliese said in a statement. “The Governor is using a special session to stir fear about the Big Beautiful Bill when the truth is that the Big Beautiful Bill continues to cover the people it was designed to serve: seniors, single mothers, children, and people with disabilities.”
During an interview with the Sentinel Wednesday, Polis said, “This is a matter of math, and the math tells the story.”
Democratic State Senate President James Coleman told the Sentinel the state budget is a culmination of bipartisan work, led by the Joint Budge Committee. He said in traveling across the state, constituents in red and blue state House districts are consistent in expressing their concern about the effect of the Trump tax and spending cuts.
Democratic House Speaker Julie McCluskie told the Sentinel that independent and state analysis of the Big Beautiful Bill all point to looming “horrors” for state residents. She said she’s planning on state lawmakers to let the numbers and facts guide the legislature toward mitigating pain from budget cuts and changes.
“I have great faith in these numbers,” she said in regards to GOP criticism that Democrats are inflating the problem and need for cuts.
State budget officials estimate the legislation will reduce Colorado’s revenue by more than $1.2 billion in the current fiscal year, with continued losses of roughly $700 million annually in the years following. The Office of State Planning and Budgeting projects a $783 million deficit for the current year.
The $1.2 billion revenue loss from H.R. 1 impacts Colorado’s general fund, Medicaid and the Supplemental Nutrition Assistance Program (SNAP). While much of the law’s long-term effects will be felt in future years, the immediate budget gap has flipped what had been a balanced state budget, which included a $300 million TABOR surplus at the start of the fiscal year on July 1.
“This throws the state budget out of balance,” Polis said. “There is now a gap that needs to be met with real cuts or real revenue. It’s simply a mathematical formula.”
Polis said the state must now draw on a “modest portion” of its rainy day reserves, enact targeted spending restrictions and implement tax policy changes that will enhance revenue, without raising the flat income tax rate.
According to Polis and state budget officer chief Mark Farandino, the federal law’s impact is particularly acute in Colorado due to the state’s “rolling conformity” tax structure, which automatically incorporates changes to the federal tax code. About 70% of the state’s revenue loss stems from corporate tax deductions created under H.R. 1.
The new law also increases Colorado’s expenses by shifting more responsibility for key social programs to the state. Cost-sharing changes to Medicaid and the Supplemental Nutrition Assistance Program, including work requirements and more frequent eligibility reviews, could add as much as $100 million in annual costs starting in fiscal year 2027, eventually growing to nearly $1 billion by 2032, according to state estimates.
The total combined impact could exceed $3 billion over the coming years, according to OSPB estimates.
“I want to be clear that I would oppose any efforts to cut education funding,” Polis said. “And I’m confident that there will be no cuts to education funding in our schools.”
In the face of this fiscal crisis, Polis is taking executive action to reduce state spending. Effective Aug. 27, most new job postings for state positions will be suspended through December 31. Exemptions will be granted for positions funded by TABOR-exempt sources and those essential to public safety or critical services.
State officials did not immediately have an estimate of how many jobs would be suspended, but they estimated that they would save more than $3 million in positions.
Polis is calling on lawmakers to pass legislation to re-balance the state’s budget and protect services. While the special session proclamation does not prescribe specific bill language, it outlines a broad agenda including changes to state tax policy, health care access, food assistance programs and implementation of a new artificial intelligence regulation law.
Among the tax-related proposals up for discussion are:
• Separating the state tax code from federal deductions such as the Qualified Business Income deduction and Foreign-Derived Intangible Income deduction
• Selling insurance premium tax credits to raise revenue
• Closing a host of corporate tax “loopholes” in an effort to offset tax cuts made by corporate tax changes imposed under the Trump spending and tax cut bill
• Revising corporate tax rules to prevent further erosion of the state tax base
“Of this almost $800 million gap, $300 million comes from accelerated business depreciation,” Polis said. “What we are looking at doing in the special session would provide more stability over time by, for instance, selling tax credits now that move some of that revenue up.”
Health care and food assistance programs face immediate threats under the new federal law, state budget officials said.
Colorado’s Medicaid program is set to lose federal matching funds for services provided by certain nonprofit community health clinics, particularly those offering reproductive services, including abortion care, which will only affect Planned Parenthood in Colorado.
“They were effectively defunded from Medicaid for their non abortion services,” Polis said about Planned Parenthood. “Remember, they never got Medicaid federal funding for their abortion services, but they do cancer screenings, they do reproductive health care, they are a first-line provider to many families, especially women, some men as well.”
Polis is asking the legislature to pass amendments allowing the state to continue funding these providers so Medicaid beneficiaries don’t lose access to preventive and reproductive health services, especially in rural areas.
SNAP, a lifeline for low-income families, is also affected. The federal government plans to reduce its share of Colorado’s administrative costs from 50% to 25%, creating an annual funding gap of nearly $50 million, state officials estimate.
Beginning in October, the federal government will also reassess Colorado’s SNAP eligibility system, a move that could force the state to potentially cover an additional $150 million more in benefits currently paid entirely with federal dollars.
In tandem with the expiration of federal health insurance premium subsidies and changes to marketplace regulations, the state is bracing for a sharp increase in health insurance premiums on the individual market. According to filings with the Colorado Division of Insurance, some regions — especially on the Western Slope — may see premium hikes approaching 38%. The Aurora region would see hikes of about 28%.
“For a family of four in Montrose, that’s an average $25,832 increase,” Polis said. “We can and should take action to reduce that impact.”
Polis is pushing for increased funding to the Health Insurance Affordability Enterprise, which could help offset the rising costs and prevent large-scale coverage losses.
Polis said Colorado is in a stronger position than many states because of its balanced budget amendment and well-managed reserves, but decisive action is needed now.
“Unlike Congress, which can spend whatever they want,” Polis said. “This bill, as you know, increased the federal deficit by trillions of dollars. We don’t do that here.”